<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark  One)
[  X  ]     QUARTERLY  REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE     ACT  OF  1934

                       For the quarter ended June 30, 2001

                                       OR

[    ]     TRANSITION  REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE     ACT  OF  1934

             For the transition period from __________ to __________


                 Commission File Number                  1-12727
                                                      ----------


                                    SENTRY TECHNOLOGY CORPORATION
                                    -----------------------------
                  (Exact name of registrant as specified in its charter)


       Delaware                                        96-11-3349733
     ----------                                        -------------
 (State  or  other  jurisdiction  of                                   (I.R.S.
Employer
incorporation  or organization)                                   Identification
No.)

               350  Wireless  Boulevard,  Hauppauge,  New  York
---------------------------------------------------------------------
                                                                     11788
(Address  of  principal  executive  offices)                      (Zip Code)

                                   631-232-2100
                                   ------------
              (Registrant's telephone number, including area code)


    (Former name, former address and former fiscal year, if changed since last
                                     report)


Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by  Section  13  or 15 (d) of the Securities Exchange Act of 1934
during  the  preceding 12 months (or for such shorter period that the registrant
was  required  to  file  such  reports), and (2) has been subject to such filing
requirements  for  the  past  90  days.

Yes     X          No
        -


As of August 14, 2001, there were 61,467,872 shares of Common Stock outstanding.

<PAGE>


                          SENTRY TECHNOLOGY CORPORATION
                          -----------------------------
                                      INDEX
                                      -----




                                                        Page  No.
                                                        ---------
PART  I.   FINANCIAL  INFORMATION
---------------------------------

Item  1.     Financial  Statements  (Unaudited)

     Consolidated  Balance  Sheets  --
     June  30,  2001  and  December  31,  2000                  3

     Condensed  Consolidated  Statements  of  Operations  --
     Three  Months  Ended  June  30,  2001  and  2000
     and  Six  Months  Ended  June  30,  2001  and  2000        4

     Condensed  Consolidated  Statement  of  Shareholders'  Equity
     Six  Months  Ended  June  30,  2001                        5

     Condensed  Consolidated  Statements  of  Cash  Flows  --
     Six  Months  Ended  June  30,  2001  and  2000             6

     Notes  to  Condensed  Consolidated  Financial
     Statements  --  June  30,  2001                         7  -  10


Item  2.     Management's  Discussion  and  Analysis  of
     Financial  Condition  and  Results  of  Operations     10  -  13

<PAGE>

PART  II.   OTHER  INFORMATION
------------------------------

Item  6.     Exhibits  and  Reports  on  Form  8-K             13


Signatures                                                     14

<PAGE>

<TABLE>
<CAPTION>



SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)


<S>                                                             <C>         <C>
                                                                June 30,    December 31,
                                                                     2001            2000
                                                                ----------  --------------

ASSETS
--------------------------------------------------------------
CURRENT ASSETS
  Cash and cash equivalents                                     $     662   $         927
  Accounts receivable, less allowance for doubtful
     accounts of $870 and $890, respectively                        3,476           3,178
  Net investment in sales-type leases -
     current portion                                                   77              84
  Inventories                                                       4,373           5,274
  Prepaid expenses and other current assets                           413             202
                                                                ----------  --------------
    Total current assets                                            9,001           9,665

NET INVESTMENT IN SALES-TYPE LEASES -
  non-current portion                                                  64             100
SECURITY DEVICES ON LEASE, net                                         28              36
PROPERTY, PLANT AND EQUIPMENT, net                                  3,119           3,324
OTHER ASSETS                                                          274             720
                                                                ----------  --------------

                                                                $  12,486   $      13,845
                                                                ==========  ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------------------------
CURRENT LIABILITIES
  Revolving line of credit                                      $   2,910   $       2,920
  Accounts payable                                                  1,217           1,463
  Accrued liabilities                                               1,842           2,633
  Obligations under capital leases -
     current portion                                                  131             124
  Deferred income                                                     326             352
                                                                ----------  --------------
    Total current liabilities                                       6,426           7,492

OBLIGATIONS UNDER CAPITAL LEASES -
  non-current portion                                               2,684           2,768
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY                          175             199
                                                                ----------  --------------
    Total liabilities                                               9,285          10,459

REDEEMABLE CUMULATIVE PREFERRED STOCK                                 ---          29,180

COMMON SHAREHOLDERS' EQUITY (DEFICIT)
  Common stock                                                         61              10
  Additional paid-in capital                                       44,358          12,859
  Accumulated deficit                                             (40,218)        (38,663)
  Receivable from stock sale                                       (1,000)            ---
                                                                ----------  --------------
    Total common shareholders' equity                               3,201         (25,794)
                                                                ----------  --------------
                                                                $  12,486   $      13,845
                                                                ==========  ==============

See notes to the condensed consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

SENTRY  TECHNOLOGY  CORPORATION
CONDENSED  CONSOLIDATED  STATEMENTS  OF  OPERATIONS
 (In  thousands,  except  per  share  data)

                                                                      Three Months Ended                 Six Months Ended
                                                                           June 30,                           June 30,
                                                                    --------------------                ------------------
<S>                                                                 <C>        <C>                       <C>       <C>
                                                                      2001          2000                  2001      2000
                                                                    ---------  ---------                --------  --------

REVENUES                                                          $     4,005   $  5,169                 $ 8,675   $10,041

COSTS AND EXPENSES:
Cost of sales                                                           2,103      2,615                   4,494     5,274
Customer service expenses                                               1,024      1,140                   2,153     2,297
Selling, general and
   administrative expenses                                              1,395      2,039                   2,917     3,812
Research and development                                                  208        225                     383       451
                                                                  -----------  ---------                --------  --------

                                                                        4,730      6,019                   9,947    11,834
                                                                  -----------  ---------                --------  --------

OPERATING LOSS                                                           (725)      (850)                 (1,272)   (1,793)

INTEREST EXPENSE                                                          136        166                     283       324
                                                                  -----------  ---------                --------  --------

LOSS BEFORE INCOME TAXES AND CUMULATIVE
     EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                            (861)    (1,016)                 (1,555)   (2,117)

INCOME TAXES                                                              ---        ---                     ---       ---
                                                                  -----------  ---------                --------  --------

NET LOSS BEFORE CUMULATIVE EFFECT OF
     CHANGE IN ACCOUNTING PRINCIPLE                                      (861)    (1,016)                 (1,555)   (2,117)

CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLE                                                 ---        ---                     ---       301
                                                                  -----------  ---------                --------  --------

NET LOSS                                                                 (861)    (1,016)                 (1,555)   (2,418)

PREFERRED STOCK DIVIDENDS                                                 ---        333                      25       665

RETURN TO COMMON SHAREHOLDERS FROM
     REDEMPTION OF PREFERRED STOCK                                        ---        ---                  27,198       ---
                                                                  -----------   --------                --------  --------

NET INCOME (LOSS) ATTRIBUTED TO
     COMMON SHAREHOLDERS                                          $      (861)  $ (1,349)                $25,618   $(3,083)
                                                                  ============  ========                ========  ========

NET INCOME (LOSS) PER COMMON SHARE BEFORE
     CUMULATIVE EFFECT OF CHANGE IN
     ACCOUNTING PRINCIPLE:
  Basic                                                           $     (0.01)  $  (0.14)                $  0.43   $ (0.29)
                                                                  ============  =========                =======   ========
  Diluted                                                         $     (0.01)  $  (0.14)                $  0.42   $ (0.29)
                                                                  ============  =========                =======   ========

NET INCOME (LOSS) PER COMMON SHARE
  Basic                                                           $     (0.01)  $  (0.14)                $  0.43   $ (0.32)
                                                                  ============  =========                =======   ========
  Diluted                                                         $     (0.01)  $  (0.14)                $  0.42   $ (0.32)
                                                                  ============  =========                =======   ========

WEIGHTED AVERAGE COMMON SHARES
  Basic                                                                 61,468      9,751                 59,457     9,751
                                                                  ============  =========               ========   =======
  Diluted                                                               61,468      9,751                 60,291     9,751
                                                                  ============  =========               ========   =======

See notes to the condensed consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


SENTRY  TECHNOLOGY  CORPORATION
CONDENSED  CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY
 (In  thousands)

                                                                                             Total
                                                                  Retained                   Common      Redeemable
                                          Common      Additional  Earnings    Receivable  Shareholders'  Cumulative
                                          Stock        Paid-In   (Accumulated   From         Equity      Preferred
                                      Shares  Amount    Capital   Deficit)    Stock Sale   (Deficit)     Stock
                                      ------  -------  ---------  ---------  ------------  ----------  ---------
<S>                                   <C>     <C>      <C>        <C>        <C>           <C>         <C>
  BALANCE, DECEMBER 31, 2000           9,751  $    10  $ 12,859   $(38,663)  $       ---   $ (25,794)  $ 29,180

  Net loss and comprehensive loss        ---      ---       ---     (1,555)          ---      (1,555)

  Preferred stock dividends              ---      ---       (25)       ---           ---         (25)        25

  Common shares issued in connection
    with redemption of Class A
    Preferred Stock                   28,667       28    29,177        ---           ---      29,205    (29,205)

  Common Stock issued to
    Dutch A&A net of
    Expenses                          23,050       23     2,347        ---        (1,000)      1,370        ---
                                      ------  -------  ---------  ---------  ------------  ----------  ---------


  BALANCE, JUNE 30, 2001              61,468  $    61  $ 44,358   $(40,218)  $    (1,000)  $   3,201   $    ---
                                      ======  =======  =========  =========  ============  ==========  =========
</TABLE>

See notes to the condensed consolidated financial statements

<PAGE>

<TABLE>
<CAPTION>


SENTRY  TECHNOLOGY  CORPORATION
CONDENSED  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
(In  thousands)


                                                                                Six  Months  Ended
                                                                                     June  30,
                                                                                ------------------


                                                                                    2001      2000
                                                                                --------  --------
<S>                                                                             <C>       <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
---------------------------------------------------
  Net loss                                                                      $(1,555)  $(2,418)
  Adjustments to reconcile net loss
     to net cash used in operating activities:
     Depreciation and amortization of security
        devices and property, plant and equipment                                   255       314
     Amortization of intangibles and other assets                                    13       498
     Provision for bad debts                                                         27        25
  Changes in operating assets and liabilities:
     Accounts receivable                                                           (325)    2,070
     Net investment in sales-type leases                                             43       279
     Inventories                                                                    901      (540)
     Accounts payable and accrued liabilities                                    (1,037)     (226)
     Other, net                                                                     192      (309)
                                                                                --------  --------

    Net cash used in operating activities                                        (1,486)     (307)
                                                                                --------  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property, plant and equipment, net                                    (41)      (11)
  Security devices on lease                                                          (1)      (16)
  Intangibles                                                                       (20)       (5)
                                                                                --------  --------

    Net cash used in investing activities                                           (62)      (32)
                                                                                --------  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (payments) under the revolving line of credit                      (10)      657
  Repayment of obligations under capital leases                                     (77)      (97)
  Proceeds from sale of stock, net                                                2,370       ---
  Receivable from stock sale                                                     (1,000)      ---
                                                                                --------  --------

    Net cash provided by financing activities                                     1,283       560
                                                                                --------  --------

INCREASE (DECREASE) IN CASH                                                        (265)      221

CASH, at beginning of period                                                        927       951
                                                                                --------  --------
CASH, at end of period                                                          $   662   $ 1,172
                                                                                ========  ========

</TABLE>

See notes to the condensed condolidated financial statements.
<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
JUNE  30,  2001


NOTE  A  --  Basis  of  Presentation - Knogo North America Inc. and Video Sentry
--------------------------------------------------------------------------------
Corporation  Merger
-------------------
Sentry  Technology  Corporation  ("Sentry"),  a  Delaware  Corporation,  was
established  to effect the merger of Knogo North America Inc. ("Knogo N.A.") and
Video  Sentry Corporation ("Video Sentry") which was consummated on February 12,
1997 (the "Effective Date").  The merger resulted in Knogo N.A. and Video Sentry
becoming  wholly  owned  subsidiaries  of  Sentry.  The  consolidated  financial
statements  include  the accounts of Sentry and its majority-owned subsidiaries.
All  intercompany  accounts  and  transactions  have  been  eliminated  in
consolidation.

The  consolidated  financial  statements  are  unaudited.  In  the  opinion  of
management,  all  adjustments,  consisting  of  normal  recurring  adjustments
necessary  for  a fair presentation of the financial information for the periods
indicated,  have  been included.  Interim results are not necessarily indicative
of  results  for  a  full  year.  These  financial  statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
included  in  Sentry's Annual Report to Stockholders on Form 10-K for the fiscal
year  ended  December  31,  2000,  as  filed  with  the  Securities and Exchange
Commission.

NOTE  B  --  Investment  by  Dutch  A&A
---------------------------------------
On  January  8,  2001,  Dutch A&A Holding, B.V. ("Dutch A&A) acquired 23,050,452
shares  of  our  common  stock  for  $3 million, of which $1 million was paid in
January 2001, $1 million was paid on April 30, 2001 and the remaining balance of
$1  million  was  due  on July 31, 2001, which has been extended by the Board of
Directors to August 31, 2001.  Dutch A&A is a Netherlands company which, through
its  subsidiaries,  is  in  the  business  of development, manufacture, sale and
distribution  of  various kinds of identification, access control and anti-theft
electronic  article  surveillance  systems  and  accessories.

As of January 8, 2001, Dutch A&A owns 37.5% of our outstanding common stock.  At
any  time  prior to January 8, 2002, Dutch A&A may increase its ownership of our
common  stock  to a total of 51% of the shares of common stock then outstanding.
If  the  average  market  value  of  our  common stock, measured over any 10-day
trading period during the one year period following January 8, 2001, is at least
$15.0  million, the purchase price for the additional shares shall be determined
by  multiplying the actual number of shares to be purchased by $.001; otherwise,
the  purchase price will be $1.5 million.  At any time prior to January 8, 2003,
Dutch  A&A  may  increase its ownership of our common stock to a total of 60% of
the  shares  of  common  stock  then  outstanding.  The  purchase  price for the
additional shares shall be determined as follows: If the average market value of
the  common  stock, measured over a 10-day period during the two years preceding
January 8, 2003, is at least $25 million, the purchase price shall be determined
by  multiplying  the actual number of shares to be purchased by $.001.  If Dutch
A&A  previously  exercised its right to acquire shares increasing its investment
to 51% of our common stock, but the average market value test was not met at the
time  of  the  second  purchase,  then the purchase price shall be $3.5 million;
otherwise  the  purchase  price  shall  be  $5.0 million.  As a condition to the
investment by Dutch A&A, our stockholders elected three nominees of Dutch A&A to
the Board of Directors at a Special Meeting of Stockholders on December 8, 2000.
If Dutch A&A has not acquired 51% of our common stock by January 8, 2003, one of
the three nominees of Dutch A&A will resign and be replaced, with the consent of
Dutch  A&A,  by  a  nominee of our directors who are not nominated by Dutch A&A.

In  addition  to  the  election  of  three nominees of Dutch A&A to the Board of
Directors,  other  matters  which  were approved at the December 8, 2000 Special
Meeting  of Stockholders and became effective on January 8, 2001 were amendments
to  the  Company's  certificate of incorporation to: (i) permit the payment of a
dividend  of  additional  shares of Class A Preferred Stock at the rate of 0.075
shares  of  Class  A  Preferred  Stock for each share of Class A Preferred Stock
held;  (ii) to reclassify Class A Preferred Stock into shares of common stock on
a ratio of five shares of common stock for each share of Class A Preferred Stock
outstanding; and (iii) to increase the number of the Company's authorized shares
of  common  stock  to  140,000,000.  As  a  result  of  the  dividend  and
reclassification,  28,666,660  common  shares  were  issued  to  former  Class A
Preferred  shareholders.

Also,  on  December  28,  2000,  the  Board of Directors increased the number of
directors  from  five  to  seven  effective  upon  the  closing of the Dutch A&A
investment.

The reclassification of the Class A Preferred Shares resulted in a return to the
common shareholders of $27.2 million, which was recorded in the first quarter of
2001.  This  amount  represents  the difference between the fair market value of
the common stock issued and the carrying amount of the preferred stock redeemed.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
JUNE  30,  2001

NOTE  C  --  Financial  Condition  and  Liquidity
-------------------------------------------------
We  have  incurred  reduced  revenue  levels,  decreased  financial position and
recurring  operating  losses  over  the  past  several years.  To strengthen our
financial  position,  a  number  of  activities  have  been initiated including:

-     Investment of $3 million in newly issued shares of the Company's common
      stock by Dutch A&A.  The transaction with Dutch A&A will allow us to
      introduce new products, share resources and simplify our capital
      structure.
-     Improvements  in  existing  products  and  service  capabilities.
-     Various  cost  cutting  and  cost  saving  initiatives.

As  a result of these activities, we anticipate that current cash reserves, cash
obtained  pursuant  to  the  Dutch A&A transaction, existing lines of credit and
cash  generated  by  operations should be sufficient to meet our working capital
requirements,  as well as future capital expenditure requirements, over the next
twelve  months.

NOTE  D  --  Net  Investment  in  Sales-Type  Leases
----------------------------------------------------
We are the lessor of security devices under agreements expiring in various years
through  2003.  The  net  investment  in  sales-type  leases  consists  of:

<TABLE>
<CAPTION>

                                                     June 30, 2001    December 31, 2000
                                                    ---------------  -------------------
<S>                                                 <C>              <C>
                                                             (in thousands)
Minimum lease payments receivable                   $          162   $              215
Allowance for uncollectible minimum lease payments              (8)                 (10)
Unearned income                                                (13)                 (21)
                                                    ---------------  -------------------
Net investment                                                 141                  184
Less current portion                                            77                   84
                                                    ---------------  -------------------
Non-current portion                                 $           64   $              100
                                                    ===============  ===================
</TABLE>

<TABLE>
<CAPTION>

NOTE  E  --  Inventories
------------------------
Inventories  consist  of  the  following:

                                                     June 30, 2001    December 31, 2000
                                                    ---------------  -------------------
<S>                                                  <C>              <C>
                                                              (in thousands)
Raw materials                                        $        1,226  $            1,479
Work-in-process                                               2,053               2,259
Finished goods                                                1,094               1,536
                                                     --------------  ------------------
                                                     $        4,373  $            5,274
                                                     ==============  ==================
</TABLE>


Reserves  for excess and obsolete inventory totaled $3,160,000 and $3,354,000 as
of June 30, 2001 and December 31, 2000, respectively and have been included as a
component  of  the  above  amounts.


NOTE  F  --  Related  Party  Transactions
-----------------------------------------
As  a  result  of  the  Dutch A&A investment, Sentry entered into a distribution
agreement  with Dutch A&A which contemplates a two-way distribution relationship
between the companies.  Under the agreement, Sentry has the rights to sell Dutch
A&A's  EAS,  access  control  and RFID products and accessories and Sentry gives
Dutch  A&A  the  rights  to  sell  its  EAS  and  CCTV products and accessories.
Pricing  for  products  under the agreements are at the lowest prices charged to
affiliates.  In  addition, Dutch A&A receives annual management fees for product
marketing  and  product  engineering  management  from  Sentry  in the amount of
$100,000.  Also,  Peter  Murdoch, a shareholder of Dutch A&A, receives an annual
salary of $150,000 in the capacity of President of Sentry.  Purchases from Dutch
A&A were $26,000 and $86,000 in the quarter and six month periods ended June 30,
2001.  Fees,  services  and  sales  to Dutch A&A were $15,000 and $36,000 in the
quarter  and  six  months  ended  June 30, 2001.  The net amount receivable from
Dutch  A&A  as  of  June  30,  2001  is  $23,000.

<PAGE>
SENTRY  TECHNOLOGY  CORPORATION
NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
JUNE  30,  2001


NOTE  G  --  Recent  Accounting  Pronouncements
-----------------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities." SFAS No. 133 is effective for all fiscal
years  Beginning  after June 15, 2000. SFAS No. 133, as amended and interpreted,
establishes  accounting  and  reporting  standards  for  derivative instruments,
including  certain  derivative  instruments embedded in other contracts, and for
hedging activities. All derivatives, whether designated in hedging relationships
or  not,  will be required to be recorded on the balance sheet at fair value. If
the  derivative  is  designated  in  a fair value hedge, the changes in the fair
value  of  the derivative and the hedged item will be recognized in earnings. If
the  derivative is designated in a cash-flow hedge, changes in the fair value of
the  derivative  will  be  recorded  in  other  comprehensive income and will be
recognized  in  the income statement when the hedged item affects earnings. SFAS
No.  133  defines  new requirements for designation and documentation of hedging
relationships as well as ongoing effectiveness assessments in order to use hedge
accounting.  For  a derivative that does not qualify as a hedge, changes in fair
value  will  be  recognized  in earnings. We adopted SFAS No. 133 on January 31,
2001  and  the implementation did not have a material impact on our consolidated
financial  statements.


In  June  2001,  the  Financial  Accounting  Standards  Board  issued  Financial
Accounting  Standards  No.  141 ("SFAS No. 141"), "Business Combinations."  SFAS
No.  141 applies prospectively to all business combinations initiated after June
30,  2001  and  to all business combinations accounted using the purchase method
for  which  the  date  of acquisition is July 1, 2001, or later.  This statement
requires  all  business  combinations  to be accounted for using one method, the
purchase  method.  Under  previously  existing  accounting  rules,  business
combinations  were  accounted  for  using  one  of  two  methods,  the
pooling-of-interests  method  or  the purchase method.  The adoption of SFAS No.
141  is  not  expected  to  have  a  material  impact on the Company's financial
statements.

In  June  2001,  the  Financial  Accounting  Standards  Board  issued  Financial
Accounting  Standards  No.  142 ("SFAS No. 142"), "Goodwill and Other Intangible
Assets."  SFAS No. 142 addresses financial accounting and reporting for acquired
goodwill  and  other  intangible  assets.  Under SFAS No. 142, goodwill and some
intangible  assets  will  no  longer  be  amortized,  but  rather  reviewed  for
impairment on a periodic basis. The provisions of this Statement are required to
be  applied  starting with fiscal years beginning after December 15, 2001.  This
Statement  is  required  to  be applied at the beginning of the Company's fiscal
year and to be applied to all goodwill and other intangible assets recognized in
its  financial  statements  at  that  date.  Impairment  losses for goodwill and
certain  intangible  assets  that  arise  due to the initial application of this
Statement are to be reported as resulting from a change in accounting principle.
Goodwill  and  intangible  assets  acquired after June 30, 2001, will be subject
immediately  to  the provisions of this Statement.  The adoption of SFAS No. 142
is not expected to have a material impact on the Company's financial statements.


NOTE  H  --  Change  in  Accounting  Principle
----------------------------------------------
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  No.  101  (SAB 101), Revenue Recognition in Financial Statements.  The
SAB  summarizes  certain  of  the  staff's  views in applying generally accepted
accounting  principles  to  revenue  recognition  in  the  financial statements.

In  accordance  with  SAB  101,  we  have  changed  our  accounting  method  for
recognizing  revenue  on  the  sale of equipment where post-shipment obligations
exist.  Previously,  we recognized revenue for equipment when title transferred,
generally  upon  shipment.  Beginning  with  the  first quarter of year 2000, we
began  recognizing  revenue when installation is complete or other post-shipment
obligations  have  been  satisfied.  The  cumulative  effect  of  the  change in
accounting  method is a non-cash reduction in net earnings of $301,000, or $0.03
per  share.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
JUNE  30,  2001

NOTE  I  --  Earnings  Per  Share
---------------------------------
Basic  earnings  per share is determined by using the weighted average number of
common  shares  outstanding  during  each  period.  Diluted  earnings  per share
further  assumes the issuance of common shares for all dilutive potential common
shares  outstanding.  The  calculations  for  earnings per share are as follows:

<TABLE>
<CAPTION>
                                                        Three Months Ended   Six Months Ended
                                                              June 30,            June 30,
                                                        ------------------  ------------------
                                                          2001      2000      2001      2000
                                                        --------  --------  --------  --------
                                                                (in thousands, except
                                                                  per share amounts)
<S>                                                     <C>       <C>       <C>       <C>
Net Income (Loss):
  Income (loss) before cumulative effect
       of accounting change                             $  (861)  $(1,016)  $25,643   $(2,117)
  Effect of preferred stock dividends                       ---      (333)      (25)     (665)
                                                        --------  --------  --------  --------
                                                           (861)   (1,349)   25,618    (2,782)
  Cumulative effect of accounting change                    ---       ---       ---      (301)
                                                        --------  --------  --------  --------
  Net income (loss) attributed to common shareholders   $  (861)  $(1,349)  $25,618   $(3,083)
                                                        ========  ========  ========  ========

Weighted Average Common Shares:
  Weighted average common shares for basic earnings
    per share                                            61,467     9,751    59,457     9,751
  Stock option plans                                        ---       ---       834       ---
                                                        --------  --------  --------  --------
  Weighted average common shares for diluted earnings
    per share                                            61,467     9,751    60,291     9,751
                                                        ========  ========  ========  ========

Basic and Diluted Earnings per Common Share:
  Before cumulative effect of accounting change         $ (0.01)  $ (0.14)  $  0.43   $ (0.29)
  Cumulative effect of accounting change                    ---       ---       ---     (0.03)
                                                        --------  --------  --------  --------

  Basic earnings per common share                       $ (0.01)  $ (0.14)  $  0.43   $ (0.32)
                                                        ========  ========  ========  ========
  Diluted earnings per common share                     $ (0.01)  $ (0.14)  $  0.42   $ (0.32)
                                                        ========  ========  ========  ========
</TABLE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS  OF  OPERATIONS

Certain  Factors  That  May  Affect  Future  Results
----------------------------------------------------

Information  contained  or  incorporated by reference in this periodic report on
Form  10-Q  and  in  other  SEC  filings  by  Sentry  contains  "forward-looking
statements"  within  the meaning of the Private Securities Litigation Reform Act
of  1995  which can be identified by the use of forward-looking terminology such
as  "believes,"  "expects,"  "may,"  "will,"  "should"  or  "anticipates" or the
negative  thereof,  other  variations  thereon  or comparable terminology, or by
discussions  of  strategy.  These  forward-looking  statements  involve  certain
significant  risks  and  uncertainties, and actual results may differ materially
from the forward-looking statements. For further details and discussion of these
risks  and  uncertainties  see  Sentry  Technology  Corporation's  SEC  filings
including,  but not limited to, its annual report on Form 10-K. No assurance can
be  given  that future results covered by the forward-looking statements will be
achieved,  and  other factors could also cause actual results to vary materially
from  the  future  results covered in such forward-looking statements. We do not
undertake  to  publicly  update  or revise any of our forward-looking statements
even  if  experience or future changes show that the indicated results or events
will  not  be  realized.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS  OF  OPERATIONS

Results  of  Operations:
------------------------

Consolidated revenues were 23% and 14% lower in the quarter and six months ended
June  30,  2001  than  in the quarter and six month periods ended June 30, 2000.
Our  overall  domestic  revenues were impacted by the soft economic environment,
resulting  in  a  slowdown  or delay in new retail store openings of some of our
customers.    Our  backlog  of  orders  at  June 30, 2001 was approximately $5.1
million  as  compared to approximately $5.8 million at June 30, 2000.   Revenues
from  third party customers, other than Sensormatic, in the current periods were
99%  of  total revenues in both the second quarter and first six months of 2001,
as  compared to 86% and 87% of total revenues in the prior year period.    Total
revenues  for  the  periods  presented  are  broken  out  as  follows:

<TABLE>
<CAPTION>


                                     Q-2     Q-2      %      6 Mos.  6 Mos.     %
                                     2001    2000   Change    2001    2000    Change
                                    ------  ------  -------  ------  -------  -------
                                          (in thousands)      (in thousands)

<S>                                 <C>     <C>     <C>      <C>     <C>      <C>
EAS                                 $1,632  $1,895     (14)  $2,967  $ 4,060     (27)
CCTV                                   919   1,809     (49)   3,031    3,236      (6)
SentryVision(R)                        464     408      14      849      695      22
3M library products                    167     282     (41)     293      655     (55)
                                    ------  ------  -------  ------  -------  -------
Total sales                          3,182   4,394     (28)   7,140    8,646     (17)
Service revenues and other             823     775       6    1,535    1,395      10
                                    ------  ------  -------  ------  -------  -------
Total revenues                      $4,005  $5,169     (23)  $8,675  $10,041     (14)
                                    ======  ======  =======  ======  =======  =======
</TABLE>


Direct  sales of EAS products in the 2001 periods were similar to the prior year
periods,  however  total EAS revenues were negatively impacted by a reduction in
OEM  sales  to  Sensormatic  of  $0.6 and $1.2 million in the second quarter and
first  six  months  of  2001,  respectively.  Presently, we do not anticipate an
increase  the  level  of sales to Sensormatic through the rest of the year.  The
decrease  in  CCTV  revenues is primarily related to a lesser marketing emphasis
placed  on  non-retail  CCTV sales as part of our strategy to attract dealers in
the commercial and industrial markets for SentryVision . We are currently in the
process  of  negotiating  with  several  domestic  and international large-scale
security  dealer  integrators.  SentryVision  sales increased due to the initial
sales  of  the new SmartTrack system, which is scheduled for full release in the
third  quarter.  To  date, we have received positive feedback from our customers
on  the  features  and  reliability  of  SmartTrack,  resulting  in  new  sales
opportunities.  We  see  a  growing  trend  for product acceptance and increased
market opportunities for traveling camera systems.  Sales of 3M library products
were  lower  primarily as a result of reduced marketing emphasis of lower margin
products  we  do not manufacture.  Service revenues increased as a result of the
increase  in  the  installed  base  of  systems.

Cost  of  sales  were  53%  and 52% of total revenues in the three and six month
periods  ended  June 30, 2001 compared to 51% and 53% in the same periods in the
previous  year.  The differences in percentages were primarily due to changes in
product  mix.

Customer  service expenses were 10% and 6% lower in the second quarter and first
six months of 2001 than in the second quarter and first six months of 2000.  The
expense reduction is due to a combination of our ability to reduce the number of
customer  service  representatives  and  lower  Service  Partner  costs.  We are
encouraged  by  the  improvements made in our service delivery system, which has
resulted  in  fewer  service  calls  and  a quicker service response time to our
customers.  Our  remedial  warranty  costs  associated  with  prior  generation
SentryVision  installations  have  continued  to  decrease.

Selling, general and administrative expenses were 32% and 23% lower in the three
and  six  month periods ended June 30, 2001 when compared to the same periods of
the  previous  year  primarily  as a result of lower amortization of patents and
goodwill  and  lower  sales  commissions.  We continued to augment our sales and
marketing  efforts  through the hiring of a new sales director and the hiring of
new  sales  account  executives.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS  OF  OPERATIONS

Research  and  development  costs  were lower when compared to the previous year
periods  due  to  a  reduction  in  headcount and our continued concentration on
development  of  the  SmartTrack  system.

Net  interest  expense  for  the  second  quarter  and  first six months of 2001
decreased  due  to lower average borrowings under our revolving credit agreement
and  lower  interest  rates.

Due to net operating losses, we have not provided for income taxes in any of the
periods  presented.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  No.  101  (SAB 101), Revenue Recognition in Financial Statements.  The
SAB  summarizes  certain  of  the  staff's  views in applying generally accepted
accounting  principles  to  revenue recognition in the financial statements.  In
accordance  with  SAB 101, we have changed our accounting method for recognizing
revenue  on  the  sale  of  equipment  where  post-shipment  obligations  exist.
Previously,  we  recognized  revenue  for  equipment  when  title  transferred,
generally  upon  shipment.  Beginning  with  the  first quarter of year 2000, we
began  recognizing  revenue when installation is complete or other post-shipment
obligations  have  been  satisfied.  The  cumulative  effect  of  the  change in
accounting  method  is  a non-cash reduction in net earnings of $0.3 million, or
$0.03  per  share.

As  a result of the foregoing, Sentry had a net loss of $0.9 and $1.6 million in
the  quarter and six month periods ended June 30, 2001 as compared to a net loss
of  $1.1  and  $2.4  million in the quarter and six month periods ended June 30,
2000.

We  recorded  preferred stock dividends of $25,000 through January 8, 2001 prior
to  the  preferred stock redemption, as compared to $0.3 and $0.7 million in the
second  quarter  and  first  six  months  of  2000.

Effective January 8, 2001, and just prior to the Dutch A&A investment, there was
a  payment  of a dividend of additional shares of Class A Preferred Stock at the
rate  of  0.075  shares  of  Class  A  Preferred Stock for each share of Class A
Preferred  Stock held and immediately thereafter a reclassification of the Class
A  Preferred  Stock  into common stock at a ratio of five shares of common stock
for  each share of Class A Preferred Stock outstanding.  The reclassification of
the  Class A Preferred Shares resulted in a return to the common shareholders of
$27.2  million,  which  was  recorded in the first quarter of 2001.  This amount
represents  the  difference  between  the  fair market value of the common stock
issued  and  the  carrying  amount  of  the  preferred  stock  redeemed.

Liquidity  and  Capital  Resources  as  of  June  30,  2001
-----------------------------------------------------------

The  Company  has  incurred reduced revenue levels, decreased financial position
and  recurring  operating losses over the past several years.  To strengthen the
Company's  financial  position,  a  number  of  activities  have  been initiated
including:

-     Investment  of  $3  million in newly issued shares of the Company's common
stock  by  Dutch  A&A.  The transaction with Dutch A&A will allow the Company to
introduce  new  products,  share  resources  and  simplify the Company's capital
structure.

-     Improvements  in  existing  products  and  service  capabilities.

-     Various  cost  cutting  and  cost  saving  initiatives.

As  a  result  of  these  activities,  the Company anticipates that current cash
reserves, cash obtained pursuant to the Dutch A&A transaction, existing lines of
credit  and  cash  generated  by  operations  should  be  sufficient to meet the
Company's  working  capital  requirements, as well as future capital expenditure
requirements,  over  the  next  twelve  months.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS  OF  OPERATIONS

On  January  8,  2001,  Dutch A&A Holding, B.V. ("Dutch A&A) acquired 23,050,452
shares  of  the  Company's  common stock for $3 million, of which $1 million was
paid  in  January  2001, $1 million was paid on April 30, 2001 and the remaining
balance  of $1 million was due on July 31, 2001, which was extended by the Board
of  Directors  to  August  31,  2001.  Dutch A&A is a Netherlands company which,
through  its  subsidiaries, is in the business of development, manufacture, sale
and  distribution  of  various  kinds  of  identification,  access  control  and
anti-theft  electronic  article  surveillance  systems  and  accessories.

As  of  January 8, 2001, Dutch A&A owns 37.5% of the outstanding common stock of
the  Company.  At  any time prior to January 8, 2002, Dutch A&A may increase its
ownership  of  the  Company's  common  stock  to a total of 51% of the shares of
common  stock  then  outstanding.  If  the average market value of the Company's
common stock, measured over any 10-day trading period during the one year period
following January 8, 2001, is at least $15.0 million, the purchase price for the
additional shares shall be determined by multiplying the actual number of shares
to  be  purchased  by $.001; otherwise, the purchase price will be $1.5 million.
At  any  time  prior to January 8, 2003, Dutch A&A may increase its ownership of
the  Company's common stock to a total of 60% of the shares of common stock then
outstanding.  The  purchase  price for the additional shares shall be determined
as  follows:  If  the  average market value of the common stock, measured over a
10-day  period  during  the two years preceding January 8, 2003, is at least $25
million, the purchase price shall be determined by multiplying the actual number
of shares to be purchased by $.001.  If Dutch A&A previously exercised its right
to  acquire  shares  increasing  its  investment  to 51% of the Company's common
stock,  but  the average market value test was not met at the time of the second
purchase,  then the purchase price shall be $3.5 million; otherwise the purchase
price shall be $5.0 million.  As a condition to the investment by Dutch A&A, the
stockholders  of the Company elected three nominees of Dutch A&A to the Board of
Directors  at  a  Special Meeting of Stockholders on December 8, 2000.  If Dutch
A&A  has  not acquired 51% of the Company's common stock by January 8, 2003, one
of the three nominees of Dutch A&A will resign and be replaced, with the consent
of Dutch A&A, by a nominee of the directors of the Company who are not nominated
by  Dutch  A&A.

In  addition  to  the  election  of  three nominees of Dutch A&A to the Board of
Directors,  other  matters  which  were approved at the December 8, 2000 Special
Meeting  of Stockholders and became effective on January 8, 2001 were amendments
to  the  Company's  certificate of incorporation to: (i) permit the payment of a
dividend  of  additional  shares of Class A Preferred Stock at the rate of 0.075
shares  of  Class  A  Preferred  Stock for each share of Class A Preferred Stock
held;  (ii) to reclassify Class A Preferred Stock into shares of common stock on
a ratio of five shares of common stock for each share of Class A Preferred Stock
outstanding; and (iii) to increase the number of the Company's authorized shares
of  common  stock  to  140,000,000.

Also,  on  December  28,  2000,  the  Board of Directors increased the number of
directors  from  five  to  seven  effective  upon  the  closing of the Dutch A&A
investment.


PART  II  -  OTHER  INFORMATION
-------------------------------

Item  6.     Exhibits  and  Reports  on  Form  8-K

     (a)  List  of  Exhibits:
          10.28 Waiver and Eighth Amendment to the Loan and Security Agreement,
          dated August  10,  2001, between General Electric Capital Corporation
          and Knogo North America Inc.

     (b)  Reports  on  Form 8-K - There were no reports on Form 8-K filed for
          the  three  months  ended  June  30, 2001.

<PAGE>

SENTRY  TECHNOLOGY  CORPORATION
PART  II  -  SIGNATURES


SIGNATURES

Pursuant  to  the  requirements  of the Securities and Exchange Act of 1934, the
registrant  had  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.


                                                SENTRY  TECHNOLOGY  CORPORATION
                                                -------------------------------


     Date:     August  14,  2001                By:  /S/   PETER  J.  MUNDY
               -----------------                     ----------------------
                                                     Peter  J.  Mundy,
                                                     Vice  President
                                                     Finance  and
                                                     Chief  Financial  Officer
                                                     (Principal  Financial
                                                      and  Accounting  Officer)